Shophouse sale on the rise!

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Total shophouse transaction values reached S$836.1 million in the first half of 2021, a 29.9% increase compared to the corresponding period last year. From a low of S$117.0 million in Q2 2020, total transactions have since rebounded to S$365.4 and S$470.7 million in Q1 and Q2, respectively.

There were 118 transactions in H1 2021, exceeding the 90 in H2 2020 and the last recent high of 99 in H1 2018 (Exhibit 1). While freehold shophouses (78.8%) still account for the bulk of transactions in H1 2021, leasehold sales volume more than double from H2 2020 to 25 units.

Buyers who were drawn by prospects of capital appreciation bought leasehold properties in better-located districts. With over half of the leasehold transactions in District 2, Tanjong Pagar, this prime area has retained its popularity among buyers.

Our shophouse-based neighbourhoods are very valuable, and they continue to be highly sought-after. The Little India district saw the highest transaction volume of shophouses in the first half of this year, with 26 being sold.

The average sale price for shophouses in District 8 was at S$4.2 million. This neighborhood was a popular area for investors looking to enter the shophouse market, with the average price being less than S$5 million. Also, in District 15, the average sales price was just under S$4.5 million. This is an attractive result for investors who want to enter the shophouse market, with average prices well below the price of the area before redevelopment.

Shophouses in the historic districts of Singapore have become very highly sought after. For example, they are still bought and sold with considerable interest in the two main districts, primarily due to their prime locations. The average price of a shophouse sold in District 1(Raffles Place, Cecil, Marina, People’s Park) and 2 is S$11.5 million, a figure expected to rise as more are sold.

Shophouse sale chart
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While prices of freehold shophouses declined slightly in the first quarter of the year, this represents a 59.5% increase over the same time last year when Singapore was grappling with COVID-19. On average, leasehold prices for land increased by 4.9% in the first three months of the year. This was due to a surge in transactions in the Tanjong Pagar area, fetching higher prices.

About 56.8% of the shophouses sold in the first half of 2021 were above S$5 million, a higher proportion against the 42.2% in H2 2020. There is a high demand for high-end shophouses, and this demand is being met by a small number of premium properties that are well-suited to the market.

At 91 Tanjong Pagar Road, a shophouse sold for more than five times the previous sale price after being held for 15 years. At 13 Ann Siang Road, a shophouse sold for more than 9.2% above the last price sale after being held for less than a year.

Market outlook

Buyers were most eager and active in the first half of 2021. Year 2020 was rough, but buyers were still more interested in buying shophouses than other real estate investments. In just six months, the total transaction value reached 91.6% of the entire year 2020 while the number of units transacted accounted for 81.4% of last year’s total.

So barring any waves of infection and based on current demand momentum, it is more than likely that the sales amount for 2021 will exceed S$1.46 billion and that sales volume will cross the 200-unit mark.

In addition to the high demand from buyers, we might also see an increase in shophouse sales in the second half of the year. With many sellers still keen to achieve a quick sale, prices could rise as buyers try to get a bargain. Inevitably, there will be a ceiling where the buyers will start to show resistance.

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